Defense stocks are gaining at writing following reports that Iran has launched a ballistic missile attack on Israel.
The Israel Defence Forces (IDF) made that announcement only hours after a senior White House official warned that Iran is preparing for such an attack.
The geopolitical escalation has led to a 3.0% gain in the S&P 500 Aerospace and Defense index on Tuesday. Elbit Systems, Lockheed Martin, and Huntington Ingalls stocks are gaining in particular.
Elbit Systems Ltd (NASDAQ: ESLT)
Elbit stock has gained nearly 5.0% this week as it’s one of the largest Israel-based defense electronics companies that provides communication equipment, surveillance systems, drones, etc. to the country’s military.
Investors are flocking to ESLT since demand for its products is rising significantly amidst the ongoing conflict in the Middle East. A near 1.0% dividend yield may be attracting investors to Elbit shares as well.
In August, Elbit Systems reported its financial results for the second quarter that handily topped Street estimates.
The Nasdaq-listed firm ended the quarter with total order backlog of a whopping $21.1 billion, reiterating that the global geopolitical tensions are meaningfully increasing demand for its products.
Lockheed Martin Corp (NYSE: LMT)
Shares of Lockheed Martin are up 5.0% today after Iran launched an attack on Israel. In June, Israel ordered 25 fighter jets (F-35) from the US aerospace and defense giant for $3.0 billion.
The ongoing war in Ukraine also helped LMT share price to rally nearly 50% over the past seven months. The US recently approved an F-35 jet sale worth $7.2 billion to Romania as well.
Analysts currently have a consensus “overweight” rating on Lockheed stock. The Street-high price target of $704 signals a more than 15% potential upside from here.
A 2.06% dividend yield makes LMT shares all the more attractive to own at writing.
Huntington Ingalls Industries Inc (NYSE: HII)
Huntington is extended its recent gains after the escalation of the conflict in the Middle East on Tuesday. It is one of the largest military shipbuilding companies in the United States.
Ukraine war and the Israel-Hamas conflict that’s now expanding to the neighboring countries have resulted in a significant increase in global spending on defense, including naval operations this year.
Additionally, HII currently pays a 1.95% dividend yield that’s keeping income investors attracted to it.
Last week, Gautam Khanna – a TD Cowen analyst reiterated his “buy” rating on Huntington stock which he expects will hit $290 over the next 12 months. His price target indicates potential for a 10% gain from here.
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